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Canada Economy Rises 0.1% in May as Oil, Gas Industry Offsets Housing Drop
Canada’s gross domestic product expanded in May after stalling the month before, with mining and oil leading increased goods production, while wholesale and real estate activity declined.
Canada’s economic output rose 0.1 percent to a seasonally adjusted annual rate of C$1.23 trillion ($1.19 trillion) in May, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News predicted a 0.2 percent gain, based on the median of 22 estimates.
Canada’s annual growth rate probably slowed to 3 percent in the second quarter from a decade-high pace of 6.1 percent between January and March, when low mortgage rates and temporary tax credits sparked spending, the Bank of Canada said July 22. The economy’s growth of 3.5 percent this year will still lead the U.S., the euro zone and Japan on consumer and government spending, the bank said.
Mining, oil and gas grew 3.4 percent in May from April, leading a 0.6 percent gain in goods-producing industries, Statistics Canada said. Retailing grew 0.3 percent, led by clothing, food and beverages, the government agency said, and manufacturing increased 0.1 percent.
Companies such as Canadian Tire Corp. are benefiting from consumer demand as job creation spurs new spending, while commodity producers including Potash Corp. of Saskatchewan Inc. have profited from rising global orders.
Wage Growth
Canada’s job creation was almost five times more than economists expected in June, restoring most of the country’s job losses since 2008, Statistics Canada said July 9. Employment rose by 93,200 in June, following gains of 24,700 in May and April’s record 108,700.
Today, Statistics Canada also reported that average weekly earnings of payroll employees increased by 3.7 percent in May from a year earlier, the fastest since February 2008. Earnings rose 0.4 percent in May from April, as non-farm payrolls fell by 25,000, or by 0.2 percent. Payrolls increased 0.4 percent from the year-earlier month.
The Bank of Canada raised its key rate for a second month on July 20 and said further moves must be “weighed carefully” against the recovery. The bank also said “the global economic recovery is proceeding but is not yet self-sustaining.”
“In that base case, and there is a lot of risk on both sides of that base case, on the upside and the downside, in that base case we have interest rates rising gradually,” Pierre Duguay, a deputy governor at the central bank, said in a July 27 interview in Ottawa just before his retirement.
Prolonged Recovery
Investors are betting on another rate increase, with the rate on the three-month overnight index swap at 0.86 percent yesterday. The rate measures what investors predict the central bank’s benchmark will average over that time.
Gross domestic product gained 3.8 percent from May 2009, today’s report said.
Canada has raised rates as its biggest trade partner, the U.S., reported this week that consumers lost confidence in July, shaken by mounting concern over jobs and wages.
“The U.S. and world economies are fragile. A sustained recovery will be prolonged and market demands will remain volatile,” Kathryn McQuade, chief financial officer of Canadian Pacific Railway Ltd., said on a July 28 earnings call.
Canada’s housing market also showed signs of slowing in today’s GDP report as the central bank has predicted. The output of real estate agents and brokers dropped 11 percent in May, the fifth straight decline. Residential construction fell 3.8 percent, leading a 1.6 percent decrease in construction.
Service industries fell 0.l percent in May, the statistics agency said.
To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.
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